Wiley Accounting
Weekly Updates

Discussion Topics for Today's Classroom

Description: Unemployment in Canada has hit its lowest rate in forty years. The curious thing though, is that wages are not rising, in contradiction to our understanding of demand and supply. So, we seem to be faced with a case of good news/bad news. Though an increase in jobs is a very good thing, Manulife Asset Management executive Frances Donald said “I would caution us against celebrating too quickly.,”

1) With employment numbers up, how does it look for you in terms of finding summer employment?”

2) What’s your theory on why wages are not keeping up with job growth?

3) On page 422 of Wiley’s Financial Accounting: Tools for Business Decision-Making, you can read about the work of collection agencies. How do you think the current low unemployment tsitutation would influence the work of collection agents?

Description: Some call them job killers, those automated checkouts that seem to be spreading in the retail world. According to a survey from Dalhousie University, about 25% of those sampled had never used a self-checkout. Automation obviously allows for companies to cut costs. Some argue, though, that technological change leads to job growth.

2) How will these advancements in technology impact the Canadian economy?

3) In the article, you can read a comment from citizen Dan Morris of Brockville who said “Machines don’t pay taxes, they don’t pay into the pension plan.” Where do companies account for their pension liabilities in their financial statements? Hint: See page 62 of Wiley’s Financial Accounting: Tools for Business Decision-Making.

Description: Some shocking news emerged this week as we found out that Canada had arrested Huawei Chief Financial Officer Meng Wanzhou at the request of the United States. As the Canadian court held a bail hearing on Friday, it seems that the CFO faces possible fraud charges regarding Huawei’s use of a subsidiary to sell product to Iran. Meanwhile, the Chinese government is expressing considerable concern around the matter. Stock markets reacted negatively in fear that the event may trigger further trade troubles between the US and China.

Description: For many years, General Electric (GE) was a darling of the stock market, hitting target after target and pursuing solid growth. But now, analysts are sounding alarm bells. There are liquidity concerns about GE, as well as an ongoing investigation of its insurance business. In addition, there may be possible tax issues to deal with. It’s no wonder the stock has reached a low last seen during the financial crisis.

1) How does a company go from a place of high esteem to, as the story says, a place where it “can now barely go one full week without a negative headline?”

2) How would these current problems at GE impact an auditor’s decisions around audit risk? (For more information on this topic, consult Wiley’s Auditing: A Practical Approach.)

3) What are some common measures of liquidity, one area of concern at GE. (If you consult chapter 14 of Wiley’s Financial Accounting: Tools for Business Decision-Making, you can see a full suite of liquidity measures all in one location.)

Description: Many of us have heard about Tim Horton’s franchisees suing parent franchisor, Restaurant Brands International. But now comes word that franchisees of Second Cup are suing their head office as well. Franchisees are unhappy with their profit performance, arguing that the parent’s use of an advertising fund may have harmed them. Franchisees are also upset that head office has not helped them make up market share lost to other chains.

2) Given that it probably impacts the public image of a brand like Second Cup or Tim Horton’s, why do you think we are seeing these cases of franchisees suing franchisors?

3) In chapter nine of Wiley’s Financial Accounting: Tools for Business Decision-Making, you can read how franchises are accounted for. What classification of assets does a franchise fit under on the statement of financial position?

Description: Thanks a lot for that one! Several years ago, Canadian and US taxpayers bailed out General Motors (GM) during the financial crisis. But GM is back in the black and it is saying it needs to close its plant in Oshawa to retool for the future, leaving 2500 people in this city out of work. The impact is huge.

3) In chapter seven of Wiley’s Managerial Accounting: Tools for Business Decision-Making, we learn a number of key concepts for decision making, such as relevant costs, sunk costs and opportunity cost. Discuss how GM executives may have employed these cost terms in making their restructuring decisions.

Description: Nissan Chairman Carlos Ghosn has been ousted for financial misconduct. This is shocking news for the man credited with turning the company around. The details of the investigation have not been made public, but one aspect seems to be a under reporting of Ghosn’s compensation. Ghosn has been arrested along with a Nissan director Greg Kelly.

2) Why do you think company officials with so much to lose would risk partaking in this behaviour?

3) In chapter seven of Wiley’s Financial Accounting: Tools for Business Decision-Making, we read about internal control. What aspects of the system of internal control do you think may have failed Nissan in this embarrassing episode?

Description: Do you like chocolate? Well a lot of the world sure does. There’s a bit of a crisis in the cocoa world these days though, according to Bloomberg. One of the big suppliers, Saf-Cacao of Ivory Coast, has become part of a total of 32 exporters who have defaulted on their supply agreements. KPMG has carried out an audit of the industry revealing the extent of the default on contracts.

3) In chapter one of Wiley’s Auditing: A Practical Approach, you can read about various types of audit engagements that an auditor might perform. What type of audit do you think KPMG performed on the cacao industry?

Description: Deep Earth Energy Production Corp. (DEEP) is going deep. The company is the driving force behind a 3.5 km deep well to be drilled in Estevan Saskatchewan. The well will generate geothermal energy from underground steam, providing a source of green power to the Western province. Funnily enough, DEEP’s deep well source was discovered by the old carbon producing oil industry.

1) Are there any renewable energy projects near your university campus? What variety?

2) Why do you think the federal and provincial governments contributed to the costs of the project?

3) See page 25 of Wiley’s Managerial Accounting: Tools for Business Decision-Making. Note the distinctions between Fixed and Variable Costs. How do these terms apply in the story about the costs of DEEP’s power production?

Description: With winter-like weather hitting several parts of Canada last week, you may have seen many citizens enjoying the warmth of a “Canada Goose” jacket. With rising revenues, the company is seeing its shares up about twenty percent. Meanwhile, Canada Goose has invested in the acquisition of Baffin, a footwear manufacturer. It looks like Canada Goose is expanding beyond its warm clothing and into the winter boot market.